U.S.

- CANADA LUMBER DISPUTE

AND THE BC WILDFIRES: A MAJOR
HITBACK FOR THE CANADIAN
LUMBER INDUSTRY
 CANADAS SOFTWOOD TRADE

More than 600 mills produce softwood lumber in

Canada.
Canada exports softwood lumber to more than 140
countries.
Since 2002, Canadian softwood exports to China
have increased 25-fold to $1.6 billion, while exports
to South Korea, Southeast Asia and the U.K. have
increased more than 200 per cent, to over $700
million.
 CANADAS SOFTWOOD TRADE WITH
THE UNITED STATES
90 per cent of U.S. homes are built with softwood. U.S.
domestic supply, however, meets only 70 per cent of the
countrys softwood lumber needs. Canada supplies
virtually all the rest.
The United States is the main destination for Canadian
forest product exports, which were worth USD 18 billion in
2016.
The U.S. National Association of Home Builders calculates
that every additional USD 1,000 in home construction
costs puts home ownership out of reach for more than
150,000 U.S. families.
Since 2005, Canadian lumber companies have invested
more than USD 5 billion in the U.S. forestry sector.
 US CANADA SOFTWOOD LUMBER
DISPUTE
FACTS ABOUT THE DISPUTE

The CanadaUnited States softwood lumber dispute is

one of the most significant and enduring trade disputes
in modern history. The dispute has had its biggest effect
on British Columbia, the major Canadian exporter
of softwood lumber to the United States.
The heart of the dispute is the claim that the
Canadian lumber industry is unfairly subsidized by the
federal and provincial governments.
Specifically, most timber in Canada is owned by
provincial governments. The price charged to harvest
the timber (the "stumpage fee") is set administratively
rather than through a competitive auction, as is often
the practice in the United States.
 HISTORY

Since 1982, softwood lumber exports from Canada to

the U.S. have been subject to five separate rounds of
U.S. trade litigation with three managed trade
agreements.
The last agreement came into force in 2006 and expired
on Oct. 12, 2015. Under the terms of the agreement, the
U.S. was precluded from launching trade action against
Canada for a period of one year after expiry.
Canada, with significant input from B.C., engaged the
U.S. in negotiations on a new managed trade
agreement for lumber. However, the insistence of the
U.S. industry on imposing a hard cap quota on Canada
(and B.C.) along with the election of a new American
President led to an impasse.
 CURRENT STATUS
On April 24, 2017, the U.S. Department of Commerce issued a preliminary
determination on subsidy and assessed preliminary countervailing duty
rates as follows:
Canfor 20.26%
J.D. Irving 3.02%
Tolko 19.50%
West Fraser 24.12%
Resolute 12.82%
all others 19.88%
Duties paid in the form of cash deposits are held in trust until rates are
final following all appeals.
Currently, avenues of appeal are through NAFTA, the U.S. Court of
International Trade and the World Trade Organization.
Canada has always successfully argued that lumber exports to the U.S.
are not subsidized, and NAFTA tribunals have found the
same. Unfortunately for Canada and for American consumers, history
shows that it can take several years of appeals at NAFTA and WTO
tribunals before duties are lifted or a new agreement is negotiated that
cancels duties
 WHY IT MATTERS

B.C. is Canadas largest producer of softwood

lumber accounting for approximately half of overall
production.
While B.C. has made great strides in opening up
Asian markets, the U.S. is still B.C.s number one
market for softwood lumber. In 2016, the value of
B.C. lumber exports to the U.S. was $4.6 billion.
Forestry is one of B.C.s key economic drivers and
key employers providing more than 60,000 direct
jobs. About 40% of B.C.s rural communities are
dependent on forestry.
 More flames added to the lumber industry BC
WILDFIRE
 IMPACT ON LUMBER INDUSTRY

The wildfires in the B.C. Interior that have forced some sawmills to
halt operations have resulted in a boost in lumber prices at a time
when forestry companies have been squeezed by softwood
duties on exports to the U.S.
The benchmark price of Western spruce-pine-fir lumber rose 7.12
per cent to US$406 per thousand board feet from US$379.
In the case of mills staying shut for months or even sustaining
damage, its estimated prices could rise between 15 and 17 per
cent.
Wood prices can rise as high as 6 per cent if operations remain
shut for weeks but the higher cost, a small part of construction
budgets, will be absorbed by builders and is unlikely to affect
home buyers,

The fires are set to tighten the supply of wood products and
raise prices as they disrupt timber operations during the years
peak building season.
 GOVERNMENT ACTION ON THE LUMBER
AGREEMENT AND THE BC WILDFIRE SEEKING A
LONG-TERM IMPACT

Canada will continue to press their American

counterparts to rescind this unfair and unwarranted
trade action.
Canada has put forward a number of reasonable
proposals to the current U.S. administration that is
responsive to views expressed by U.S. industry. These
proposals ensure security of supply at fair prices to U.S.
consumers and U.S. companies that rely on Canadian
imports.
Initiatives to be taken to deal with the climate change
as discussed in G20 summit at Hamburg so that the BC
forests can be saved and the industries are not affected
in the coming years.
 REFERENCE

https://www.canada.ca/en/natural-resources-
canada/news/2017
https://www.bloomberg.com/canada
https://wall-street.com/all-news/
https://www.economist.com/news/americas/21721
416-attacks-dairy-farmers-and-loggers-are-opening-
shots-bigger-confrontation-over
www.bbc.ca
www.cnbc.com
Thank you